Does Salaita Have a Contract Claim?

apparent-authority

As I’ve argued in pedantic detail, Prof. Salaita’s hypothetical promissory estoppel claim against the University of Illinois is weak. In the Illinois Court of Claims, even if one can assert  estoppel against a state instrumentality, the claim should fail unless the undiscovered facts are radically different from those publicly known. But what about an ordinary contract claim? On its face, most observers have discounted the possibility because the offer letter explicitly stated there was no contract before board approval. Prof. Nancy Kim argues to the contrary, in a thoughtful post here. The nub of her argument is one of contract interpretation:

“I think both parties intended a contract and a “reasonable person” standing in the shoes of Salaita would have believed there was an offer.  The offer was clearly accepted.  What about the issue regarding final Board approval? Does that make his belief there was an offer – which he accepted –  unreasonable?  I don’t think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted . . . There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university.”

I read this to be making an argument about conditions – that is, Prof. Kim thinks that we shouldn’t interpret the language “This recommendation or appointment is subject to approval by the Board of Trustees of the University of Illinois” as an express condition, given the anti-forfeiture preference that many courts practice.  Rather, Kim argues that we should see the term a promise which is subject to a brake – the implied duty of good faith and fair dealing: the Board of Trustees could only withhold approval for good cause. Whether the tweets in question constitute good cause then becomes the real issue.  She admits the problem “caused me some angst,” but ends up coming out against a finding of a condition.

I’m not unsympathetic to Prof. Kim’s position.  But to evaluate it, I would prefer to talk about Illinois decisional law, rather than contract doctrine in general terms.  Just for those few readers of this post who don’t already think about contract law all day long, well, I’ll tell you a secret: there is no contract law.  Notwithstanding the Restatement’s certitude, the states diverge sharply on many matters, including those as seemingly trivial as the preference against forfeiture, and as general as the liability of principals for agents’ actions. I’ve done some research into this.  I original wrote a post that catalogued the absence of evidence in Illinois for contract recovery under circumstances anything like these. But rather than subject myself to a tl;dr comment, I’ll just post the following challenges to Prof. Kim and others who care to take them on.

1. Doesn’t the “subject to approval” language from the letter make this a rather classic case of a non-offer under Restatement 26 and its adopting Illinois cases?

2. Why isn’t there an agency problem with suing the Board of Trustees in contract, when there was neither express nor apparent authority? Incidentally, the illustration on this post was taken from a good blog explanation of the interaction of apparent authority and contract law.

3. Given the hostility expressed in Patrick Engineering v. City of Naperville, 364 Ill. Dec. 40 (2012) toward estoppel & waiver arguments directed at the state, including some language about it being an affirmative duty of the promisee to inquire of the municipal official about their authority to promise despite written disclaimers to the contrary, isn’t waiver here especially likely to be a long-shot?

4.   In the real estate context, there are many cases (both in Illinois and out, see Honkomp v. Dixon, 97 Ill.App.3d (1981) holding that rejection of particular conditions, like the purchaser’s credit, must be done in good faith. But I haven’t seen a single example of good faith being read into a condition subsequent where the condition was principal approval, or really any outside of subjective conditions (“good credit,” “acceptance produce,” etc.) Can anyone find an Illinois case on point?

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17 Responses

  1. Kevin Jon Heller says:

    Perhaps someday someone who argues Salaita’s legal claim is weak will address the fact — openly admitted to by Chancellor Wise — that the Board of Trustees was not scheduled to approve Salaita’s appointment until nearly a month after his classes would have begun at Illinois.

  2. Dave Hoffman says:

    Kevin

    It’s almost as if you didn’t read my comment replying to an almost identical comment you left on my last post on this topic!

  3. Nancy says:

    Hi Dave,

    Here are my thoughts:

    1. I think Restatement 26 actually supports a finding of a contract because it was clear that the parties intended one based upon their actions. I don’t think the “subject to approval” language was express enough to overcome the clear sense that the parties intended a binding agreement. Why else would they behave the way they did (quit a tenured position, pay or at least discuss moving expenses, list his class in the catalog, etc). I think this is like the letter of intent cases where courts have found the “subject to a final written agreement” language to be a mere formality. Whether it is a condition in any given case depends upon the facts, namely what did the parties intend?

    2. Wasn’t there actual authority? I thought the person making the offer had authority to do so. (Who was it? Was it the person who typically extended offers?) There would seem to be at least apparent authority. I think a reasonable person would think the hiring party had authority to make the offer here.

    3. I think this case is different given the way “industry norms” serve as gap fillers. Given how academic hiring is done, it would be odd for Salaita to go calling around the university to check up on the authority of the person who extended the offer. I think it would make him seem paranoid and unusually untrustworthy.

    4. As I mentioned above, there are cases having to do with letters of intent which are “subject” to a final agreement. Generally, courts (even in Illinois) have found that what matters is the intent of the parties in interpreting the proviso. Here is a citation to one case: Quake Construction v. American Airlines, 537 NE 2d 863 (1989).

    The primary and overriding reason that I think there should be a contract here is that the parties intended it and to find otherwise would undermine academic hiring – what would happen if everyone now treated offers as non-binding until Board approval? Chaos and lots of uncertainty.

    I can understand why the University wants to reserve the right to rescind offers –but that right is only valid until it’s been accepted. They should at least have submitted his appointment to the Board. The Board could still have disapproved his appointment but had to act in good faith – whether his tweets constituted grounds for withholding approval should at least have been discussed by the Board. Does the fact that the University didn’t even bother with going to the Board for approval mean the University failed to act in good faith? Unfortunately, I think it might.

    Nancy

  4. Kevin Jon Heller says:

    I did not see that response, so apologies. But I don’t find it particularly persuasive. You are arguing that when a university extends an offer and says “you’ll begin teaching on date X but the trustees won’t finalise your appointment until date Y, a month later,” the reasonable response is to ask the university you are leaving permanently to give you a year off just in case the new university decides after you’ve started teaching for it that it’s decided to rescind the offer. If that’s the “reasonable” course of action, promissory estoppel means nothing.

  5. dave hoffman says:

    Kevin,
    I’m pretty sure that convincing you on any of these issues isn’t on the table. But perhaps the disagreement we’re having is over the meaning of the word reasonable. You seem to think that in PE cases it carries its ordinary meaning. I don’t – I think it carries a more restricted meaning, especially when asserted against the state (in Illinois, and elsewhere).

  6. Nancy says:

    Hi Dave,

    Here are my thoughts:

    1. I think Restatement 26 actually supports a finding of a contract because it was clear that the parties intended one based upon their actions. I don’t think the “subject to approval” language was express enough to overcome the clear sense that the parties intended a binding agreement. Why else would they behave the way they did (quit a tenured position, pay or at least discuss moving expenses, list his class in the catalog, etc). I think this is like the letter of intent cases where courts have found the “subject to a final written agreement” language to be a mere formality. Whether it is a condition in any given case depends upon the facts. Here, the facts (including when the Board expected to meet and the start date of his classes, as well as the other things mentioned above, like paying for moving costs, etc) supplemented by custom, suggest they intended a binding contract.

    2. Wasn’t there actual authority? I thought the person making the offer had authority to do so. (Who was it? Was it the person who typically extended offers?) There would seem to be at least apparent authority. I think a reasonable person would think the hiring party had authority to make the offer here.

    3. I think this case is different given the way “industry norms” and custom serve as gap fillers. Given how academic hiring is done, it would be odd for Salaita to go around calling the university to check up on the authority of the person who extended the offer. I think it would make him seem paranoid and unusually untrusting.

    4. As I mentioned above, there are cases having to do with letters of intent which are “subject” to a final agreement. Generally, courts (even in Illinois) have found that what matters is the intent of the parties in interpreting the proviso. Here is a citation to one case: Quake Construction v. American Airlines, 537 NE 2d 863 (1989).

    The primary and overriding reason that I think there should be a contract here is that the parties intended it and to find otherwise would undermine academic hiring – what would happen if everyone now treated offers as non-binding until Board approval? Chaos and lots of uncertainty.

    I can understand why the University wants to reserve the right to rescind offers –but that right is only valid until it’s been accepted. They should at least have submitted his appointment to the Board. The Board could still have disapproved his appointment but had to act in good faith – whether his tweets constituted grounds for withholding approval should at least have been discussed by the Board. Does the fact that the University didn’t even bother with going to the Board for approval mean the University failed to act in good faith? Unfortunately, I think it might.

    Nancy

  7. dave hoffman says:

    Focusing on #2,
    1. How can there be actual authority? The grant of authority specifically states that the Acting Dean had no power to conclude a contract. This would seem pretty clearly beyond the scope of the authority explicitly granted and communicated under RST Agency (2.02.) I grant that understandings matter (see illustration. 11) but not as to a reasonable person – that is, what matters is what the principal and agent thought and believed. I’m probably being obtuse, but I simply don’t see how actual authority to hire is possible when the instruction that the agent sent the 3rd party explicitly reserved authority to the principal to decide.

    2. I think the discussion about apparent authority is slightly more complex. Comment (g) to 2.03 denies apparent authority in situations involving government actors, like the University of Illinois. Even if this were not true, if, as some of supposed, there are side channel communications, that might make the agent liable but not obviously the principal. What belief, “traceable to the principal’s manifestations,” made Salaita think that the agent had discretion to contract?

  8. Nancy says:

    Dave,

    Re your 1. – The question about actual authority on my part wasn’t rhetorical – I didn’t know what the circumstances were. If the Board didn’t give the Acting Dean express authority, and if it wasn’t inherent in the authorization that wasn’t given, then you’re right – no actual authority. But I suspect this is not the full story – I think both the board and Acting Dean understood that the Acting Dean had authority to give an offer that was subject to the implied understanding that there was no material misrepresentation or that the hiring party wouldn’t do anything unexpected….So yes, I think we are back to the interpretation question. I’m also not quite sure what you mean by “understandings matter, but not as to a reasonable person” and how that explains your position on whether there was actual authority.

    Re your 2. The act would have to be the way the university acted with this hire and the past hiring practices of the university. It’s complicated because we’re talking about an institution and not an individual, but it seems that the “university” acted (approving expenses relating to his interview and hiring, advertising and enrolling students in his class – was there an announcement regarding his hiring? If so, that would also indicate the Acting Dean had authority, etc) in a way that would lead a reasonable person to think that the Acting Dean had authority to make the hire. Again, it’s all the facts together that would constitute whether the parties intended an offer.

    Nancy

  9. Nancy says:

    In my above comment I meant “contract” not “offer.”

  10. dave hoffman says:

    1. I think we’ve batted around actual authority enough for this thread – I’m content to rest on the briefs, as they say.

    2. On apparent authority, everything I’ve been able to glean about Illinois law strongly suggests that you can’t win such claims against the State. See Dunteman v. State, 38 Ill. Ct. Cl. 51 (1985); Student House, Inc. v. Board of Regents of Regency Universities, 44 Ill. 2d. 89 (1969). The typical line is “such a policy could be disastrous to the State\’s budget.” The University is clearly an agent of the state for these purposes. See Faulkner-King v. Dep\’t of Human Rights 225 Ill. App. 3d at 787-88, 587 N.E.2d at 601 (1992). So I don’t think apparent authority would give a remedy if there’s no actual authority.

  11. R Schieler says:

    Seems to me that someone, somewhere in the university, jumped the gun. Warrior has already admitted to giving approval for Salaita’s travel and moving expenses. Usually, such approval must await final offer–in this case the Board. To schedule classes well before approval is nothing new–they may be courses that the department would need to offer regardless of who’s teaching them. But I will add that many, many university leaders have vetoed departmental offers. I assume state labor laws give them the right to do so.

  12. Michael Risch says:

    While I fall on the Hoffman side of this for analysis (no way you can have actual authority in a letter that says “I have no actual authority”), I continue to be troubled by the timing of the approval. It is not reasonable for the hired party to wait until after the semester begins to move. It is not reasonable to seek a leave in October beginning 10 months later, so that 11 months later the trustees can approve someone who has already started teaching classes.

    But these facts do not create a contract – the agreement just isn’t there. Which leads me to believe that it has to be promissory estoppel. The department didn’t jump the gun, as R Schieler puts it, the department approved the payment because ALL the departments at the University ALWAYS approve moving expenses early because the trustees ALWAYS approve after the fact because you can’t run a university where all your faculty is put on payroll before they know if their $10K or $20K moving expenses will be paid. Which means that it was reasonable to rely on the offer and move. I don’t think the apparent authority argument flies – because the university apparently does this every year without killing the budget. If the UIUC administration wanted to retain real ability to turn down offers, it had to do so way earlier than after people moved to campus and started teaching.

  13. R Schieler says:

    The department appeared to have jumped the gun without final approval. Warrior admitted that–which is why the university is offering to cover expenses. And many universities have vetoed departmental offers, so it’s not a good idea for department heads to approve funds without an offer. But as another professor has pointed out, other personnel factors may have come into play as well.

  14. Dave Hoffman says:

    Michael,
    I too am troubled about the timing, but I don’t think it gives rise to a legal claim. On PE, I understand why you’d think that the particular threat to the fisc is low here, but the point remains that in Illinois estoppel against the state (UI counts), in the court of claims, is basically impossible to win. In case of doubt, that law requires that salaita make affirmative efforts to contact the principal to ascertain if the agent’s apparently a-contractual representations were warranted.
    I get that what’s left is detrimental reliance, in that he’s out of pocket expenses, and he’s quit his job. And I further get that many people would behave just as he did in response to the offer. (There is a dispute as to whether the prudent & common practice in Big 10 universities that have this kind of late approval system is to take a leave.) But that doesn’t mean he has a PE claim against an instrumentality of the State of Illinois under existing caselaw.

  15. Michael Risch says:

    OK, fair enough. If the rules of PE don’t apply to the state, then they don’t. But that’s a really broken system – enough so that anyone doing business with any public U ought to take real notice.

  16. Eric Rasmusen says:

    (1) The materials from the News Gazette include this: http://www.news-gazette.com/sites/all/files/pdf/2014/08/13/14-529.Documents.pdf “The University of Illinois Statutes (Article IX, Section 3.a.) provide that only the Board of Trustees
    has the authority to make formal appointments to the academic staff. New academic staff members
    will receive a formal Notification of Appointment from the Board once the hiring unit has received
    back from the candidate all required documents, so the appointment can be processed. Required
    forms normally include the electronic Employee Information form, the I-9, W-4, and the
    Authorization for Deposit of Recurring Payments form.”

    Salaita did not receive, presumably, the notice that new professors “will receive”. Should he have interpreted that as lack of approval by the Trustees, or not taken any notice, since everybody at U. of I. was acting as if it was a done deal?

    (2) A large portion of the letter says the university subscribes to the principles of academic freedom and tenure. I don’t know if that’s relevant, but I wince at the first line (“like at most universities” instead of “as at most universities”— and this is boilerplate, so they should have noticed it long ago!).

    “At the University of Illinois, like at most universities in this country, we subscribe to
    the principles of academic freedom and tenure laid down by the American Association of
    University Professors (AAUP). The Statement on Academic Freedom and Tenure of the
    American Association of University Professors has been since 1940 the foundation document
    in this country covering the freedoms and obligations of tenure. The AAUP Statement on
    Professional Ethics is a document of similarly broad application to those in academia. I am
    enclosing copies of these documents for your information, and commend them to your
    attention.”

  17. Akiva Cohen says:

    Kevin,

    I think the easiest response to the “but he was scheduled to start teaching” argument is one of two things:

    1) At best (for Salaita), there is an implicit promise that the candidate will be allowed to finish out the semester regardless of the Board’s decision (in which case, Salaita’s damages are quite limited); or

    2) That the offer is being expressly made subject to a risk that the board will disapprove the candidate, and therefore a candidate who accepts the offer and begins teaching does so while expressly assuming the risk that they will be disapproved and terminated mid-class (in which case Salaita’s damages are $0).

    Either of those options has the benefit of not reading the express “subject to board approval” language entirely out of the contract, which I assume that Illinois (like most states) has a strong preference against doing.

    How do you address the preference against reading language out of a contract?